Skip to main content
JP Morgan Asset Management - Home
  • My Collections
    View saved content and presentation slides
  • Logout
  • Products
      Contact Us

      Products

      • Funds Overview
      • Mutual Funds
      • ETFs
      • SmartRetirement Funds
      • 529 Portfolios
      • Alternatives
      • Separately Managed Accounts
      • Money Market Funds
      • Commingled Funds
      • Featured Funds

      Asset Class Capabilities

      • Fixed Income
      • Equity
      • Multi-Asset Solutions
      • Alternatives
      • Global Liquidity
    • Investment Strategies
        Contact Us

        Investment Approach

        • Overview
        • ETF Investing
        • Model Portfolios
        • Separately Managed Accounts
        • Sustainable Investing
        • Commingled Pension Trust Funds

        Tax Capabilities

        • Tax Active Solutions
        • Tax-Smart Platform
        • Tax Insights
        • Tax Information

        Education Savings

        • 529 Plan Solutions
        • College Planning Essentials

        Defined Contribution

        • Retirement Plan Solutions
        • Target Date Strategies
        • Retirement Income
        • Startup and Micro 401(k) Plan Solutions
        • Small to Mid-market 401(k) Plan Solutions

        Annuities

        • Annuity Essentials
      • Insights
          Contact Us

          Market Insights

          • Market Insights Overview
          • Guide to the Markets

            The J.P. Morgan Guide to the Markets illustrates a comprehensive array of market and economic histories, trends and statistics through clear charts and graphs.

          • Quarterly Economic & Market Update

            Watch J.P. Morgan Asset Management Chief Global Strategist Dr. David Kelly as he focuses on the most important themes for investors.

          • Guide to Alternatives

            Objective insights on alternatives industry trends, with charts and data across private equity, private credit, real estate, infrastructure and hedge funds.

          • Market Updates

            Read our weekly commentaries to get market insights that may help inform your investment strategy.

          • On the Minds of Investors

            What investment questions are on the minds of investors? Explore the questions investors ask frequently and find answers at J.P. Morgan Asset Management.

          • Principles for Successful Long-Term Investing

            Eight time-tested strategies for guiding investors through today’s challenges and toward tomorrow’s goals.

          • Weekly Market Recap

            Browse our Weekly Market Recap for a summary of the latest U.S. stock market headlines and insights, including an update on the S&P 500 returns.

          Portfolio Insights

          • Portfolio Insights Overview
          • Asset Class Views

            Themes and implications from the Multi-Asset Solutions Strategy Summit to help guide your portfolio decisions.

          • Taxes

            Drawing on the insights and experience of our investment specialists and market strategists, we share our perspectives on key themes and solutions for tax management.

          • Equity

            We highlight themes and implications from our equity team to help guide your portfolio decisions.

          • Fixed Income

            We highlight themes and implications from various fixed income teams to help guide your portfolio decisions.

          • Multi-Asset Solutions

            We review trends across markets and economies, consider what they mean for our multi-asset portfolios and present a positioning update.

          • Alternatives

            Drawing on the insights and experience of more than 800 global alternatives professionals, we share our perspective on the alternatives landscape.

          • Long-Term Capital Market Assumptions

            The 30th edition explores how economic nationalism and fiscal activism create challenges and silver linings, and how technology will lift profits and productivity.

          • Strategic Investment Advisory Group

            The Strategic Investment Advisory Group approaches today’s investment challenges with a global view across asset classes.

          Retirement Insights

          • Retirement Insights Overview
          • Guide to Retirement

            Discover our Guide to Retirement, updated annually to provide you with an effective framework for supporting retirement planning conversations with clients.

          • Principles for a Successful Retirement

            Using slides from the award-winning Guide to Retirement, we present 7 essential retirement planning principles, to help investors make more informed decisions.

          • Retirement Hot Topics

            Monthly short-form articles on timely retirement topics provides concise, up-to-date information essential for making informed decisions about retirement planning.

          • Social Security and Medicare Hub

            Expert guidance from our Retirement Insights team on Social Security and Medicare strategies, with actionable insights and research for a secure retirement.

          ETF Insights

          • ETF Insights Overview
          • Guide to ETFs

            Explore J.P. Morgan Asset Management’s ETF investing guide with insights on ETF market trends and best investing practices for smarter portfolio decisions.

          • Monthly Active ETF Monitor

            Monthly ETF roundup covering U.S. AUM trends, fund flows, investor positioning, active ETF growth launches, and key developments across the industry.

        • Tools
            Contact Us

            Portfolio Construction

            • Portfolio Construction Tools Overview
            • Portfolio Analysis
            • Model Portfolios
            • Investment Comparison
            • Heatmap Analysis
            • Bond Ladder Illustrator

            Defined Contribution

            • Retirement Plan Tools & Resources Overview
            • Target Date Compass®
            • Heatmap Analysis
            • Core Menu Evaluator℠
            • Price Smart℠
          • Resources
              Contact Us
              • Overview
              • Account Service Forms
              • Tax Information
              • News & Fund Announcements
              • Insights App
              • Webcasts
              • Continuing Education Opportunities
              • Library
              • Market Response Center
              • Artificial Intelligence
              • Podcasts
            • About Us
                Contact Us

                About us

                Backed by $4.6T in assets, we harness our active edge to deliver timely ideas and actionable insights that empower investors to achieve what matters most.

                • Overview
                • Diversity, Opportunity & Inclusion
                • Spectrum: Our Investment Platform
                • Media Resources
                • Our Leadership Team
                • Our Commitment to Research
              • Contact Us
              • DST Vision
              • Shareholder Login
                • My Collections
                  View saved content and presentation slides
                • Logout
              • Financial Professional Login
              Log in
              You are about to leave the site Close
              J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
              CONTINUE Go Back
              Fixed Income Insights

              5 Realistic Surprise Predictions for 2026

              BM
              Bob Michele

              Head of Global Fixed Income, Currency & Commodities

              KB
              Kelsey Berro

              Portfolio Manager, Global Fixed Income, Currency & Commodities

              Published: 12/18/2025
              5 Realistic Surprise Predictions for 2026

              Summary

              Every December, we publish our realistic surprise predictions for the year ahead. We believe these predictions have at least a 1-in-3 probability of materializing – making them realistic, while not necessarily our base case, and a surprise relative to investor positioning or market pricing. Last year, our predictions proved prescient – let’s see what 2026 brings!

              Review of our 2025 surprises

              1. Emerging market debt (EMD) and emerging market currency will post double-digit returns. This surprise is well on track to be correct as EMD has outperformed, driven by the continued soft landing in the global economy and further central bank easing around the world. For those invested in unhedged EM local bonds, returns were nearly 20% in USD terms.
              2. West Texas Intermediate (WTI) oil trades below $50 a barrel. We give ourselves partial credit. As we predicted, an oversupplied market has indeed put pressure on prices, pushing WTI down by almost 20% year-to-date (YTD) from the $70 range, but it did not breach our official $50 target.
              3. High yield (HY) bonds outperform investment grade bonds for the fifth consecutive year. This will likely come down to the wire. Thematically, we were correct that it would be a good year for carry with both asset classes up around 7%–8%, though it remains a close race to see which finishes in first.
              4. 10-year government bond yields for Italy-France and Germany-Japan converge to zero. We got a 50/50 result for this one. The spread between 10-year Italy and France compressed from 30 basis points (bps) to slightly inverted, as Italian sovereign debt received ratings upgrades from all three agencies, while France ran into fiscal challenges. Germany versus Japan, on the other hand, was incorrect, as the gap between German and Japanese yields remains around 90 bps wide, although it has narrowed from more than 100 bps wide at the start of the year. Directionally, central bank policy is trending in the way we expected. The European Central Bank cut rates down to 2% and the Bank of Japan (BoJ) is gradually hiking rates. We expect more hikes from the BoJ next year.
              5. 10-year U.S. Treasury yield trades in a range of 75 bps or less. We again give ourselves partial credit. While the rationale was correct, we were slightly too ambitious in our forecast. With the Federal Reserve (Fed) on hold for most of 2025, the YTD range for the 10-year has been 84 bps, 9 bps wider than our target. Nonetheless, as the market settled into a higher rate regime, this is still the smallest range since 2021.

              Introducing our 2026 surprises

              1. The U.S. Treasury yield curve is flat out to the 10-year maturity point at a sub-3% yield. 
                While the yield curve steepened in 2025 – resulting in the 10-year U.S. Treasury yield trading modestly above the fed funds rate and the 2s10s curve sloping upwards by more than 60 bps – the 2-year yield remains inverted to the fed funds rate. For this realistic surprise to materialize, a combination of steps must occur:
                • The Fed cuts rates to a level near neutral (2.5%–3%) as inflation continues to normalize, driven by the impacts of tariffs burning off.
                • After ending quantitative tightening in December, the Fed begins expanding its balance sheet next year by buying U.S. Treasury bills to match the growth in currency in circulation. The acceleration in USD stablecoins will also create an additional buyer of bills.
                • The Treasury Department simultaneously steps up its efforts to lower back-end rates by limiting long-end supply and increasing the share of funding via bills (with knowledge that it has captive buyers among the Fed, money market funds and stablecoins). This would all be motivated by the administration’s goal of improving housing affordability through lower mortgage rates.
              2. Gold reaches $5,000 an ounce. 
                It’s the perfect tail risk hedge. Either the significant liquidity already sloshing around in the system is ignited by a combination of monetary, fiscal and regulatory stimulus – fueling a surge in economic growth and inflation – or the whole thing ends horribly with equities bursting globally and gold serving as the flight-to-quality safe haven. We also see several thematic upside price drivers for gold:
                • Gold tends to rally after the Fed starts easing policy; over the past 10 rate cutting cycles, gold has risen over the subsequent six months 80% of the time by an average of 11%.
                • Reserve managers should continue buying to further diversify their portfolios.
                • Wealth management platforms continue to accumulate gold as a diversified store of value.
                • Global concerns over fiscal sustainability and geopolitical risks are accelerating the demand for the yellow metal.
              3. The U.S. dollar (DXY) reaches a new cycle high. 
                The fear of a “Sell America” movement in the first half of 2025 never materialized. The U.S. capital markets remain the most liquid in the world with the most depth and breadth of any nation. While we may have reached a near-term peak in terms of foreign investor concentration in unhedged dollar exposure, the momentum toward hedging back to home currencies has waned. It appears that the dollar smirk was a short-lived phenomenon and the smile has re-emerged. More recently, the dollar appears to be strengthening on risk-off, even when led by U.S. AI-themed equities. Going back to 1970, the all-time high for the DXY was above 160 in 1985. The subsequent dollar peak was above 120 in 2001. The local high in this cycle was in September 2022 at 114, about 14% above the current level and where we would benchmark ourselves.
              4. Spreads in the U.S. high yield market reach a new record low. 
                According to the Bloomberg U.S. Corporate High Yield index, the all-time low in spreads was 233 bps back in 2007. The local low for this cycle was 253 bps and occurred in November 2024. Looking ahead, the credit markets are moving past the negative headwinds of tariffs and on to the positive tailwinds of the One Big Beautiful Bill Act. Corporate fundamentals are strong, and the technical picture looks positive as well. Maturity walls have been extended well past 2026, and the dominant driver of supply has been refinancing. In addition, a rising share of the capital stack is secured, and defaults remain low. The index continues to skew toward high quality as the emergence of private credit has absorbed the marginal borrowers that typically financed themselves in the public HY market at this point in the cycle.
              5. The share of the Emerging Market Sovereign Bond index (EMBIG) with negative spreads to Treasuries triples in size. 
                Currently, less than 2% of the J.P. Morgan EMBIG index trades with a negative spread to Treasuries. There are just a few issuers that have achieved this milestone, including China and the UAE, but there is an additional ~12% of the index that trades with a spread between 0 bps and 50 bps. If even a third of that universe grinds into negative territory against the backdrop of a continued global economic expansion next year, the share of bonds with negative spreads would triple from nearly 2% to 6%. We think the most likely candidates for negative spreads are Middle East issuers. There is a massive local buyer base, strong fundamentals supported by oil revenues and likely a certain element of national pride to have their bonds trade through Treasuries, not unlike what China achieved with its dollar bonds. Furthermore, technicals are strong and investor positioning remains muted. If we are wrong, it’s possible that EM crossover buyers, who represent a large part of the market, will hesitate at the notion of buying EM at yields lower than the U.S.
              • Economic Outlook
              • Fixed Income